Medicaid Makeover

Transformation. Accountability. Coordination. Local solutions. These are just a few terms used to describe the lofty goals of the Medicaid 1115 waiver the state is undertaking to reform health care delivery for Medicaid patients and the uninsured.

The waiver has two charges: expand Medicaid managed care across the state, which began March 1, 2012, and replace the Medicaid Upper Payment Limit (UPL) program. The supplemental payment program allowed hospitals to recoup some of their uncompensated care costs by paying them up to Medicare rates.

The overarching goal: Bring together local players – public and private hospitals, physicians, and others – in regional health partnerships (RHPs) and reward them for developing community-based innovations for improving quality and reducing the cost of indigent care. The idea is to incentivize more efficient care, instead of the state writing a blank check for uncompensated care. Roughly 1,000 projects intended to improve care await review by the Texas Health and Human Services Commission (HHSC). Most of the initiatives aim to expand primary and specialty care, integrate access to behavioral health services, and improve safety, among other goals. Pending federal approval, they could get under way as early as May.

But the financing mechanism – which, based on Texas' existing structure, largely puts public hospital districts in control of selecting projects and distributing the waiver money – appears in some cases to be creating bureaucracies and funding disputes that overshadow the waiver's goals and are catching lawmakers' attention. Those hospitals are largely responsible for putting up the state's portion of program money – $12 billion – to get another $17 billion in matching funds from the federal government.

Some physicians say the issues relegated them to the sidelines of a $29 billion program that favors hospital-controlled projects, despite doctors' key role in caring for underserved patients and defining reforms.

The process is playing out differently across the state, and as the second year of the five-year waiver gets under way, many agree it is too early to rate its success.

HHSC officials acknowledge that the process is not perfect.

"Whenever you change how you are spending money, some are going to be happier than others, and this is a big change," said Lisa Kirsch, HHSC's deputy director for the 1115 Healthcare Transformation Waiver. "But this is a big step in the right direction, hopefully making good changes in the health care system and creating more transparency in where funds are going and how they are earned."

To some extent, however, the waiver could expose, if not perpetuate, some of the flaws in the old hospital financing system it seeks to replace.

Hospital Medicaid payments have been "cobbled together" from a mix of federal, state, and local dollars, historically funded mostly by public hospitals but shared with private facilities, says former HHSC commissioner and now Texas Medical Association consultant Don Gilbert.

While the waiver offers some new alternatives, "it is clearly going to move the majority of the funds to public hospitals," which account for just 16 percent of Medicaid inpatient care and about half of inpatient indigent care, he says. "It remains to be seen how transformational this waiver will be if the great majority of funding misses those that actually provide the bulk of the care."

"Physicians not only are responsible for the delivery of vital care to our patients, but we have the knowledge and expertise to help shape how that care should be delivered in the most efficient and cost-effective way," the Tarrant County Medical Society (TCMS) president said.

Refinancing and Reforming Indigent Care

The Texas Health Care Transformation and Quality Improvement Program, known as the 1115 waiver, is a response to a push by state lawmakers to control Medicaid costs through an HMO model. The move allows states to pay health plans a set monthly fee per patient to encourage efficient care.

Federal rules require reduced hospital UPL payments under HMOs. To protect the safety net funding, however, the Texas Legislature won approval from the federal government in 2011 for a demonstration waiver that allows the state to keep that money in exchange for a more accountable and quality- and cost-driven system.

The waiver replaces the UPL system with two funding pools that combine local tax monies to get additional federal funding. One stream will offset eligible hospitals' incurred uncompensated care costs and the costs for physicians, clinics, and pharmacists affiliated with the hospitals. A new pool – the Delivery System Reform Incentive Payment Pool (DSRIP) – will pay for improved performance. Eligible participants – hospitals, physicians, and community mental health centers, for example – could receive bonus payments if they develop new care delivery strategies and demonstrate improved cost and quality outcomes. That is a risk-based feature not part of the old UPL program.

HHSC designated 20 RHPs throughout the state to develop multipartner plans for their communities' needs, each led by an "anchor" public hospital district or other entity putting up the funding.

Physician practices can collaborate on waiver activities in two ways. Those working in academic health science centers that received funding under the UPL system can receive either the uncompensated care or reform initiative funding. Community physicians can partner in reform initiatives through the RHPs.

In addition, TMA negotiated a waiver provision requiring each RHP to solicit the participation of local county medical societies and include a letter describing the societies' involvement in their proposal.

The short 18-month timeline for implementing the waiver contributed to some hasty planning and confusion, says Anne Dunkelberg, associate director of the Austin-based Center for Public Policy Priorities.

"This is a refinancing of the hospital UPL bonus payments. This does not cover the whole Medicaid program, nor is it limited to Medicaid in that the activities involved and the uncompensated care that gets reimbursed go beyond Medicaid," she said.

The waiver and the HMO expansion operate on separate tracks, which may cross eventually. But for now, "the waiver itself is just one tool in a kit of many things that need to happen" to change health care delivery in Texas, Ms. Dunkelberg says.

In addition, much of the waiver money is contingent on completing the risk-based projects and hitting performance targets the Centers for Medicare & Medicaid Services ultimately must approve, Mr. Gilbert added.

Public hospitals and other governmental entities putting up the money argue that's a risk they must bear for unproven innovations and thus earns them a say over where the funds go.

Putting just a few public hospitals in charge of statewide decision making proved problematic, however, and in some cases further fragmented health care delivery, says Rep. Lois Kolkhorst (R-Brenham). She served on a joint House and Senate committee that oversaw the waiver operations in 2011 and 2012 and now chairs the House Public Health Committee.

"There has been concern about who is driving this waiver," when it was meant to be collaborative, she said. "This could be a very good step. But not done correctly, it could lead to even more expensive health care for the taxpayer."

Texas' waiver followed California's scheme, where dozens of public hospitals care for the lion's share of Medicaid and uninsured patients. But that plan doesn't necessarily fit Texas' health care landscape, where that burden is shared, Representative Kolkhorst says.

Making Progress

In the first round of waiver funding for the reform projects, representing roughly $7 billion, 75 percent went to hospitals, 10 percent to community mental health centers, 10 percent to physician practices affiliated with academic health science centers, and 5 percent to local health departments. That's according to HHSC figures available last December, when the first round ended.

Ms. Kirsch is "not surprised" many of the projects are hospital-focused, given the waiver emerged from a hospital-based UPL program, "and the public entities putting up the funds for the state match certainly are interested in funding projects at their own institutions."

Still, HHSC encouraged broad stakeholder engagement, asking for letters of support to encourage regions to be transparent and inclusive in the process.

That includes physicians, Ms. Kirsch says.

The fact that a majority of proposed projects center on primary and specialty care expansions (for example, management models) would suggest physician involvement. Many hospitals subcontract with community physician groups and other players like federally qualified health centers (FQHCs), for example.

And the fact that 10 percent of waiver funding – approximately $873 million – is designated for physician practice groups affiliated with academic health science centers is not insignificant, she added.

Physician practice groups at Texas A&M Health Science Center, for instance, are experimenting with telemedicine to expand psychiatry and other behavioral health services to surrounding rural areas with little access to such care.

There could still be opportunities for physicians to participate in waiver projects if regions opt to modify their plans after they get under way. New projects also could come up if regions do not use all of their allocated funds or get all of their original plans approved.

Tarrant County Medical Society threw its support behind the region's plan, which integrates the medical society's nascent medical home, Project Access Tarrant County, into a delivery system reform project.

The network of volunteer physicians, hospitals, and charitable community clinics will partner with FQHCs, ambulance services, and others to expand primary care to the homeless and underserved patients and keep them out of the emergency department unnecessarily.

TCMS Executive Vice President and Chief Executive Officer Brian Swift says regional leaders must get community participants to the same table. The local anchor and safety net hospital, JPS Health Network, worked with the medical society to address its area's problems.

"This is a work in progress. But our region has recognized the value in what we were doing and that in working together, we save the whole system in the long haul," he said.

Athens family physician Douglas Curran, MD, is working toward the same goal in partnering with East Texas Medical Center Athens (ETMC) to set up an urgent care clinic. His family medicine practice would provide after-hours care to Medicaid and uninsured patients with nonemergent conditions, help relieve the emergency department of unnecessarily expensive care, and keep patients healthy.

In rural areas like Athens, getting waiver support is critical to maintaining access to care, Dr. Curran warned.

The reduction in supplemental hospital funding under the waiver could be a big hit to ETMC, the only hospital in Athens, Dr. Curran says. "If we don't get some of this money and get our project to work, it will affect our ability to care for patients."

Missed Opportunities

But physicians also point to some missed opportunities along the way that could undermine the waiver's potential.

Despite a provision to include county medical society input, physicians in Bexar County have been "completely left out of the process" while hospitals there wrangle over funding, San Antonio internist John T. Holcomb, MD, says. He was TMA's representative to the state's executive waiver committee, which oversaw early development of the program.

The waiver was billed as a community-driven effort, he says, but little occurred to meaningfully engage those on the front lines actually providing the care, namely physicians.

Instead, that community input got lost to an overly bureaucratic process: The state developed a predetermined menu of projects for 20 different regions to choose from. That process has resulted in hundreds of proposals submitted to HHSC, all of which still require another layer of approval from outside state and federal authorities on what constitutes valuable care.

"This is not the way you go about health care reform," said Dr. Holcomb, chair of TMA's Select Committee on Medicaid, CHIP, and the Uninsured. State officials "did not start from trying to improve the health of Texans. They started with, 'How can we get $30 billion over five years?'"

The waiver also requires RHPs to submit a community needs assessment with their plans. But HHSC acknowledged that many based their work on previous research for their areas, rather than conducting it anew.

In El Paso County, that meant there was no group effort to collaboratively identify the most effective interventions for the region, a key area for physicians to lend their expertise, says Gilberto A. Handal, MD, an infectious disease specialist at Texas Tech University Health Sciences Center.

"Everyone is trying to do what they believe in their minds will improve care. But we are working in the same silos instead of addressing problems in the broader context," he said.

The El Paso Hospital District, the local anchor, assigned $1 million over the duration of the waiver to the El Paso County Medical Society to develop an initiative. Dr. Handal says the society is still debating what meaningful projects it could accomplish with the funds, since many of the ideas discussed that would be "truly transformative" had budgets well above that figure.

The waiver is an opportunity to create not just new projects, but also new relationships among all players to improve health care, he says.

Leaders of Project Access Dallas (PAD), a long-running charity program started by the Dallas County Medical Society (DCMS), announced that the program will close this year after reaching an impasse in waiver funding negotiations.

The program was on track to transition into a more sophisticated medical home waiver project that would expand primary and specialty care to twice as many patients; link participating hospitals, physicians, clinics, labs, pharmacies, and others into an electronic data exchange to measure health outcomes; and compensate doctors for ongoing patient management. That went beyond the limited volunteer work they did under PAD, according to DCMS.

All of that necessitated additional funding, which PAD thought it had until its private hospital partners cut the program's $38 million budget in half.

The private facilities helped fund PAD under the former UPL system. But without additional waiver support, the program folded.

Physicians thought they had a deal that included some compensation up front in return for helping hospitals reduce their uncompensated care burden and meeting certain accountability measures.

"Clearly, hospitals have a tremendous burden to carry. But the fact of the matter is, physicians help carry that load with hospitals, and the 1115 waiver is an opportunity to appreciate that reality," said Jim Walton, DO, PAD's medical director.

Financing wasn't the only issue, Dr. Walton says.

"When the needs assessment says we need more primary and specialty care to reduce uncompensated care, that by definition suggests a need to involve the physician community in the design and implementation of a solution," he said.

Instead, doctors were left out at the 11th hour.

"We're not short of ideas, and the waiver promises new financial resources. Ideal transformation means a commitment to sit at a common table with all the stakeholders willing to take care of these vulnerable patients, because this is a community problem," Dr. Walton said.

Officials at Parkland Health & Hospital System, the regional anchor, declined to comment, saying the 1115 waiver is "still a work in progress."